Chairmans Case Digests (Comm-Tax)

UP Bar Review Institute
UP Law Center
in partnership with UP Bar Operations Commission
Gesolgon v. CyberOne PH, Mikrut, and Juson

G.R. No. 210741 (October 14, 2020)| Hernando, J.
Topic: Doctrine of Piercing the Corporate Veil
Doctrine
The doctrine of piercing the corporate veil applies only in three basic instances,
namely: (a) when the separate distinct corporate personality defeats public
convenience, as when the corporate fiction is used as a vehicle for the evasion of an
existing obligation; (b) in fraud cases, or when the corporate entity is used to justify a
wrong, protect a fraud, or defend a crime; or (c) is used in alter ego cases, i.e., where a
corporation is essentially a farce, since it is a mere alter ego or business conduit of a
person, or where the corporation is so organized and controlled and its affairs
conducted as to make it merely an instrumentality, agency, conduit or adjunct of
another corporation.
Facts
Petitioners were allegedly hired by Mikrut, CEO of CyberOne AU, as part-time
customer service representatives of the same company in 2008, and soon after as full
time employees with the eventual promotion as supervisors. In 2009 Mikrut asked the
petitioners to become dummy directors and/or incorporators of CyberOne PH. In 2010,
Mikrut reduced the petitioners’ salaries and in 2011 made them choose from 3 options:
a) to take an indefinite furlough and be placed in a manpower pool to be recalled in case
there is an available position; (b) to stay with CyberOne AU but with an entry level
position as home-based Customer Service Representative; or (c) to tender their
irrevocable resignation. To preserve their jobs, they chose the 1st option. The petitioners
filed a case against the respondents and CyberOne AU for illegal dismissal. On the
other hand, the respondents argued that no employer-employee relationship existed
between petitioners and CyberOne PH as the petitioners were incorporators or directors
and not regular employees. The Labor Arbiter held that the petitioners were not
employees of CyberOne PH. The NLRC, however, ruled otherwise. Upon appeal, the
CA reversed the NLRC’s decision and affirmed that they are not employees of
CyberOnce PH.
Issue
1. Whether the court validly acquired jurisdiction over the person of CyberOne AU
2. Whether the doctrine of piercing the finds application in the case at bar
Held + Ratio
1. No, the court did not acquire jurisdiction over CyberOne AU. As a non-resident
foreign corporation which is not doing business in the Philippines, CyberOne AU
may be served with summons by extraterritorial service, to wit: (1) when the
action affects the personal status of the plaintiffs; (2) when the action relates to, or
the subject of which is property, within the Philippines, in which the defendant
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claims a lien or an interest, actual or contingent; (3) when the relief demanded in
such action consists, wholly or in part, in excluding the defendant from any
interest in property located in the Philippines; and (4) when the defendant
non-resident's property has been attached within the Philippines. In these
instances, service of summons may be effected by (a) personal service out of the
country, with leave of court; (b) publication, also with leave of court; or (c) any
other manner the court may deem sufficient.
Extraterritorial service of summons applies only where the action is in rem or

quasi in rem but not if an action is in personam as in this case; hence, jurisdiction
over CyberOne AU cannot be acquired unless it voluntarily appears in court.
Consequently, without a valid service of summons and without CyberOne AU
voluntarily appearing in court, jurisdiction over CyberOne AU was not validly
acquired. Consequently, no judgment can be issued against it, if any. Any such
judgment will only bind respondents CyberOne PH, Mikrut, and Juson.
2. No. While it is true that CyberOne AU owns majority of the shares of

CyberOne PH, this, nonetheless, does not warrant the conclusion that
CyberOne PH is a mere conduit of CyberOne AU. The doctrine of piercing the
corporate veil applies only in three basic instances: (a) when the separate distinct
corporate personality defeats public convenience, as when the corporate fiction is
used as a vehicle for the evasion of an existing obligation; (b) in fraud cases, or
when the corporate entity is used to justify a wrong, protect a fraud, or defend a
crime; or (c) is used in alter ego cases, i.e., where a corporation is essentially a
farce, since it is a mere alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs conducted as to make it
merely an instrumentality, agency, conduit or adjunct of another corporation.
The Court found that the application of the doctrine of piercing the corporate veil
is unwarranted in the present case. First, no evidence was presented to prove
that CyberOne PH was organized for the purpose of defeating public
convenience or evading an existing obligation. Second, petitioners failed to
allege any fraudulent acts committed by CyberOne PH in order to justify a
wrong, protect a fraud, or defend a crime. Lastly, the mere fact that CyberOne
PH's major stockholders are CyberOne AU and respondent Mikrut does not
prove that CyberOne PH was organized and controlled and its affairs
conducted in a manner that made it merely an instrumentality, agency, conduit
or adjunct of CyberOne AU. In order to disregard the separate corporate
personality of a corporation, the wrongdoing therein must be clearly and
convincingly established.
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Moreover, petitioners failed to prove that CyberOne AU and Mikrut, acting as

the Managing Director of both corporations, had absolute control over CyberOne
PH. Even granting that CyberOne AU and Mikrut exercised a certain degree of
control over the finances, policies and practices of CyberOne PH, such control
does not necessarily warrant piercing the veil of corporate fiction since there was
not a single proof that CyberOne PH was formed to defraud petitioners or that
CyberOne PH was guilty of bad faith or fraud. In any event, the determination of
whether there exists an employer-employee relationship between petitioners and
CyberOne PH is ultimately a question of fact. The four-fold test used in
determining the existence of employeremployee relationship involves an inquiry
into: (a) the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employer's power to control the
employee with respect to the means and method by which the work is to be
accomplished.
Based on record, petitioners were requested by respondent Mikrut to become

stockholders and directors of CyberOne PH with each one of them subscribing to
one share of stock. However, petitioners contend that they were hired as
employees of CyberOne PH as shown by the pay slips indicating that CyberOne
PH paid them P10,000.00 monthly net of mandatory deductions. Other than the
pay slips presented by petitioners, no other evidence was submitted to prove
their employment by CyberOne PH. Petitioners failed to present any evidence
that they rendered services to CyberOne PH as employees thereof.
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Allied Banking Corporation v Spouses Macam

GR No. 200635 (February 1, 2021)| Hernando, J.
Topic: Diligence Required of Banks
Doctrine
All banks are charged with extraordinary diligence in the handling and care of its
deposits as well as the highest degree of diligence in the selection and supervision of
its employees.
In contemplation of the fiduciary nature of a bank-depositor relationship, the law

imposes on the bank a higher standard of integrity and performance in complying
with its obligations under the contract of simple loan, beyond those required of
non-bank debtors under a similar contract of simple loan.
Facts
Mario Macam (Mario) invested P1,572,000.00 in the business of Helen Garcia (Helen)
through the facilitation of Elena Valerio (Valerio), a unit manager in Helen’s business.
Maribel Caña, Allied Bank Las Piñas branch head, informed teller Melissa Berras to
anticipate a P46 million deposit from Helen. Later on she gave Berras 5 filled out and
approved fund transfer receipts totalling the same amount to 5 different accounts, one
of them being Valerio’s for a sum of P10 million. Berras protested as Helen had not
deposited the P46 million yet but Caña overrode and the transfer pushed through.
However, later on Caña informed them Helen canceled the transfer so Caña instructed
branch operating officer Milani Mamalayan to book P20.3 million under “Accounts
Receivable”. Due to the huge discrepancy, Allied Bank conducted an audit and was able
to recover P9.8 million from the P20 million. The P1.1 million in the account of Spouses
Macam deposited by Valerio was also debited by Allied Bank, thereby closing the same
without their knowledge. Hence they filed a complaint for Damages against Allied
Bank. The bank denied liability and claimed ownership of the P1.1 million, traced
through the dubious deposits. The RTC ruled Allied Bank is to pay the Spouses Macam
P1.1 million plus interest, and that Spouses Caña and Spouses Garcia are to pay Allied
Bank P1.1 million plus interest. Upon appeal, the CA affirmed the RTC’s decision.
Issue
Whether Allied Bank is liable for unilaterally debiting and closing the deposit account
of the Spouses Macam.
Held + Ratio
Yes, , the bank is liable for culpa contractual stemming from the deposit agreement
between the bank and the spouses. RA 8791 enshrines the fiduciary nature of banking
that requires high standards of integrity and performance. Also, it reflects
jurisprudential holdings that the banking industry is impressed with public interest
which require banks to assume a degree of diligence higher than that of a good father
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of a family. Hence, all banks are charged with extraordinary diligence in the handling
and care of its deposits as well as the highest degree of diligence in the selection and
supervision of its employees.
The savings deposit agreement between the bank and the depositor is the contract that
determines the rights and obligations of the parties as in a simple loan. In
contemplation of the fiduciary nature of a bank-depositor relationship, the law imposes
on the bank a higher standard of integrity and performance in complying with its
obligations under the contract of simple loan, beyond those required of non-bank
debtors under a similar contract of simple loan.
With its acceptance of the Spouses Mario Macam's deposit and their opening of an
account with the bank's Pasong Tamo Branch on February 6, 2003, Allied Bank explicitly
recognized the spouses' ownership and title over the P1,590,000.00. Notably, the bank
repeatedly acknowledged the creditor-debtor relationship and its obligation to pay the
Spouses Mario Macam on demand when the latter withdrew money from the said
account on three separate occasions. Undoubtedly, Allied Bank is liable to the Spouses
Mario Macam for the P1.1 Million in their deposit account.
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Kolin Electronics Co Inc. v. Taiwan Kolin Corp.;

Taiwan Kolin Corp. Ltd. v. Kolin Electronics Co.
G.R. No. 221347; G.R. No. 221360-61 (December 1, 2021) |Hernando, J.
Topic: Intellectual Property Code (R.A. No. 8293); Trademarks
Doctrine
The use of a registered mark representing the owners goods or services by means of
an interactive website may constitute proof of actual use that is sufficient to maintain
the registration of the same. The mark displayed over the website no less serves its
functions of indicating the goods or services' origin and symbolizing the owner's
goodwill than a mark displayed in the physical market. Therefore, there is no less
premium to recognize actual use of marks through websites than their actual use
through traditional means.
In today's internet-wired market, selling electronic equipment or apparatus will

ideally involve the registration of a domain name to establish an online presence. In
conjunction with that, the use of a registered mark representing the owners goods or
services by means of an interactive website may constitute proof of actual use that is
sufficient to maintain the registration of the same.
Facts
Kolin Electronics Co., Inc. (KECI) registered a trademark application for registration of
the “KOLIN” mark under Class 35 of the International Classification of Goods and
Services for the Purpose of Registrations of Marks (Nice Classification) for use in the
business of manufacturing, assembling, importing, and selling electronic
equipment/apparatus. The mark was registered without any opposition whatsoever.
KECI then filed a Trademark Application for the mark "www.kolin.ph" under Class 35.
Taiwan Kolin filed an opposition, claiming that first, the application violates Section
123.1(d) of the IP Code which proscribes the registration of a mark identical with a
registered mark belonging to a different proprietor with an earlier filing or priority date;
Second, the registration of "www.kolin.ph" will cause grave and irreparable injury to
Taiwan Kolin's goodwill, reputation, and business using the KOLIN brand; Third, that
the trademark application violates the rule in the Implementing Rules and Regulations
(IRR) of the IP Code requiring a specific description of goods, business or services; and
fourth, that “www.kolin.ph” does not function as a mark.
Issue
Whether KECI’s right to exclusively use the “KOLIN” mark under Class 35 necessarily
include the right register its domain name “www.kolin.ph” containing KOLIN as the
dominant feature
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Held + Ratio
Yes, KECI has the right to register and use the mark “www.kolin.ph” as they were
already declared the first and prior user of the "KOLIN" mark in the Philippines and
thus the owner of the "KOLIN" mark under RA 166. In connection, Section 236 of the
IP Code states that nothing in the IP Code shall impair the rights of the enforcement of
marks acquired in good faith prior to the effective date of said law.
KECI is the registered owner of the "KOLIN" mark under Class 35, specifically for "the
business of manufacturing, importing, assembling, or selling electronic equipment or
apparatus." The list of services in the said certificate is identical to the list of services of
KECI's application for "www.kolin.ph." Having been granted the right to exclusively
use the "KOLIN" mark for the business of manufacturing, importing, assembling, or
selling electronic equipment or apparatus, KECI's application for registration of its
domain name containing the "KOLIN" mark for the same goods and services as its Class
35 registration for "KOLIN" is merely an exercise of its right under its Class 35
registration. Unless and until the said registration of KECI is nullified or cancelled
through the proper proceeding, the rights emanating from the said registration should
be respected.
An enterprise which seeks to establish its presence in the online marketplace and sell its
products therein may do so by developing its own website, which has a corresponding
domain name — an identifier analogous to a telephone number or street address. In
turn, the modern day consumer expects that a website consisting of or encompassing a
trademark used in the physical market is sponsored by or associated with the owner of
that trademark, and readily use domain names as an indicator of the source or origin of
the goods, i.e., a means of finding goods and services from a preferred source.
The owner of a registered trademark, absent any legal obstacle or compelling reason to
the contrary, should be allowed to register, in its favor, a domain name containing its
registered trademark as a dominant feature. KECI's application to register and use the
mark "www.kolin.ph," presumably as its domain name and platform to sell its products
in the internet, is merely in exercise of and consistent with its exclusive right to use
"KOLIN" on the business of manufacturing, importing, assembling or selling electronic
equipment or apparatus. KECI's exclusive right to use the "KOLIN" mark for the
business of manufacturing, importing, assembling, or selling electronic equipment or
apparatus is entitled to protection, whether such use is exercised online or through a
physical market — and whether the mark is printed on product packaging or included
in the domain name of its website. To preclude KECI from safeguarding its right to
protect the name of its domain name containing its registered mark would unduly limit
the scope of selling and antiquate the concept in relation to the current times.
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However, while the protection afforded to a registered trademark extends to market

areas that are the normal potential expansion of its business, such protection must not
infringe on the rights of another trademark owner with a registered mark in its favor.
Taiwan Kolin’s respective rights over its own “KOLIN” mark was limited to stylization
and design, which is a design mark; while, KECI has exclusive protection over the
words, letters, or numbers themselves of KOLIN in the same type of goods and services
over which it has registration.
Just as KECI's registration under Class 35 was successfully registered and is presumed
valid unless otherwise shown in an appropriate action, Taiwan Kolin's registrations in
Classes 11 and 21 remain valid and subsisting for as long as they have not been
cancelled by the IPO or the courts in the proper action. These registrations remain to be
prima facie evidence of Taiwan Kolin's ownership of the design mark and of the
registrant's exclusive right to use the specific stylization and design of the said mark in
connection with the goods, business or services specified in the certificate. Said right
remains enforceable during the certificates' effectivity and prior to their cancellation.
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Magna Ready Mix Concrete Corp v. Andersen Bjornstad Kane Jacobs, Inc.
G.R. No. 196158, (January 20, 2021)| Hernando, J.
Topic: Foreign Corporations; Personality to Sue
Provision Involved / Relevant Law

Section 133, Corporation Code of the Philippines
Doctrine
A foreign corporation that conducts business in the Philippines must first secure a
license for it to be allowed to initiate or intervene in any action in any court or
administrative agency in the Philippines. As an exception, a foreign corporation may
sue without a license on the basis of an isolated transaction.
A single act may be considered as either doing business or an isolated transaction

depending on its nature. It may be considered as doing business if it implies a
continuity of commercial dealings and contemplates the performance of acts or the
exercise of functions normally incidental to and in the progressive pursuit of its
purpose. Contrarily, it may be considered as an isolated transaction if it is different
from or not related to the common business of the foreign corporation in the sense
that there is no objective to increasingly pursue its purpose or object. A license is not
required if the foreign corporation is suing on an isolated transaction.
Facts
Magna Ready Mix Concrete Corp. (“Magna”), a Philippine corporation, engaged the
services of Andersen Bjornstad Kane Jacobs, Inc. (“Andersen”), an American
corporation, for the form design and drawing development for its project on the
development of a precast plant and PIC double tee design. They executed an
Agreement for Professional Services, providing that Magna would pay Andersen for the
latter’s services. Pursuant to the contract, ANDERSEN delivered the designs.
Magna made partial payments but did not complete the remaining payments despite
repeated demands from Andersen. Thus, Andersen filed a complaint for the collection
of a sum of money and damages. Magna filed a motion to dismiss on the basis that it
was doing business in the Philippines doing business in the Philippines without the
necessary license. Thus, it should not have legal capacity to sue Magna.
Issue
Whether Andersen has legal capacity to sue in the Philippines.
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Held + Ratio
No, Andersen has no legal capacity to sue for doing business in the Philippines
without procuring the necessary license. It is not suing on an isolated transaction
based on the contract it entered into with Magna. However, Magna is estopped from
challenging Andersen's legal capacity when it entered into a contract with it.
Under Section 133 of the Corporation Code of the Philippines, “No foreign corporation
transacting business in the Philippines without a license, or its successors or assigns,
shall be permitted to maintain or intervene in any action, suit or proceeding in any
court or administrative agency of the Philippines; but such corporation may be sued
or proceeded against before Philippine courts or administrative tribunals on any
valid cause of action recognized under Philippine laws.”
A foreign corporation that conducts business in the Philippines must first secure a
license for it to be allowed to initiate or intervene in any action in any court or
administrative agency in the Philippines. A corporation has legal status only in the
state that granted it personality. Hence, a foreign corporation has no personality in
the Philippines, much less legal capacity to file a case, unless it procures a license as
provided by law.
As an exception, a foreign corporation may sue without a license on the basis of an

isolated transaction. A single act may be considered as either doing business or an
isolated transaction depending on its nature. It may be considered as doing business if it
implies a continuity of commercial dealings and contemplates the performance of acts
or the exercise of functions normally incidental to and in the progressive pursuit of its
purpose. Contrarily, it may be considered as an isolated transaction if it is different from
or not related to the common business of the foreign corporation in the sense that there
is no objective to increasingly pursue its purpose or object. A license is not required if
the foreign corporation is suing on an isolated transaction.
However, Andersen’s of entering into a contract with Magna does not fall into the
category of isolated transactions. The contract clearly shows that Andersen was to
render professional services to Magna for a fee. It is clear then that Andersen, in
entering into that contract with Magna, was performing acts that were in progressive
pursuit of its business purpose, which involved consultation and design services.
Nevertheless, Magna is estopped from challenging Andersen’s capacity to sue. The

doctrine of estoppel states that the other contracting party may no longer challenge the
foreign corporation's personality after acknowledging the same by entering into a
contract with it. By such contract, Magna effectively acknowledged Andersen’s
personality. Magna’s allegation that it only discovered during the trial that Andersen’s
was doing business in the Philippines without a license, is therefore irrelevant.
Moreover, Magna had already benefited from the contract.
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Malayan Insurance Company v. Stronghold Insurance Company, Inc.

and Rico J. Pablo
G.R. No. 203060 (June 28, 2021)| Hernando, J.
Topic: Insurance Law; Basic Concepts; Classes of Insurance; Compulsory Motor Vehicle Liability
Insurance
Doctrine
The purpose of compulsory motor vehicle liability insurance is to provide
compensation for the death or bodily injuries suffered by innocent third parties or
passengers as a result of the negligent operation and use of motor vehicles. The
victims or their dependents are assured of immediate financial assistance, regardless
of the financial capacity of motor vehicle owners.
Facts
Respondent Rico J. Pablo got a Compulsory Third Party Liability (CPTL) insurance for
his newly-acquired vehicle from Stronghold Insurance Company Inc. (Stronghold), with
a limit of PHP 100,000. Pablo also obtained an Excess Cover for Third Party Bodily and
Death Liability from Malayan Insurance Company Inc. (Malayan) for the same vehicle,
amounting to PHP 200,000.
Pablo sideswiped a six-year-old pedestrian while driving the insured vehicle. The
victim suffered bodily injuries and was brought to the hospital for treatment, with total
expenses amounting to PHP 100,318.908. As such, Pablo filed third party liability claims
for reimbursement with both Stronghold and Malayan. Stronghold and Malayan
disagreed over the amounts to be covered under their respective policies. Hence, Pablo
went to the IC.
The IC ruled in favor of Malayan and ordered Stronghold to pay Pablo the amount of
PHP l00,000.00, and Malayan to pay the amount of only PHP 318.08. The CA reversed
and set aside the orders of the IC, and ordered Stronghold and Malayan to reimburse
Pablo the amounts PHP 42,714.83 and PHP 57,603.25, respectively. Malayan assailed the
CA’s Decision. It argued that, before the excess coverage insurer could be held liable,
the amounts in excess of the limits per item provided in the schedule of indemnities
should also be subjected to the overall limit in the policy.
Issue
Whether Malayan, as the excess coverage insurer, should be held liable only after
applying the per item limit in Stronghold’s Schedule of Indemnities.
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Held + Ratio
No. The schedule does not restrict the kinds of damages that petitioner therein may
be made to pay as long as liability is shown to have arisen and the requisites for each
kind of damages are present.
The Court upheld the CA ruling. The purpose of compulsory motor vehicle liability
insurance is to provide compensation for the death or bodily injuries suffered by
innocent third parties or passengers as a result of the negligent operation and use of
motor vehicles. The victims or their dependents are assured of immediate financial
assistance, regardless of the financial capacity of motor vehicle owners.
The Court clarified Western Guaranty Corporation v. CA, wherein it was held that the
schedule does not restrict the kinds of damages that the insurance company may be
made to pay as long as liability is shown to have arisen and the requisites for each kind
of damages are present. The schedule is not an enumeration of the specific kinds of
damages that may be awarded. Its purpose was to set limits to the amounts the
insurance company would be liable for in cases of claims for death, bodily injuries of,
professional services and hospital charges, for services rendered to traffic accident
victims"; it does not limit or exclude claims for other kinds of damages.
It is clear that Stronghold's policy is identical with the assailed policy in Western
Guaranty. The limit of liability in the items listed under the Schedule of Indemnities is
the amount provided therein; the limit of liability with regard to other kinds of damages
not listed in the same Schedule of Indemnities is the total amount of insurance
coverage. It then follows that the amounts in excess of the limits of liability in the
schedule for items is already for the personal account of the insured or an excess
coverage provider.
Therefore, Stronghold's liability with regard to injuries provided in its policy's Schedule
of Indemnities is subject to the limits provided therein. Any excess will not be for its
account, and will be for the account of the excess coverage provider which is Malayan
in this case. Thus, Stronghold is liable in the amount of PHP 42,714.83; Malayan, on the
other hand, is liable in the amount of PHP 57,603.25. Legal interest as held in Nacar v.
Gallery Frames should be imposed on both amounts.
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Metroplex Berhad and Paxell Investment Limited v. Sinophil Corporation,

and Belle Corporation
G.R. 208281 (June 28, 2021)| Hernando, J.
Topic: Business Organizations: Corporations; Corporate Powers; Power to Increase or Decrease Capital
Stock or Incur, Create, Increase Bonded Indebtedness
Doctrine
After a corporation faithfully complies with the requirements laid down in Section 38,
the SEC has nothing more to do other than approve the same. Pursuant to Section 38,
the scope of the SEC's determination of the legality of the decrease in authorized
capital stock is confined only to the determination of whether the corporation
submitted the requisite authentic documents to support the diminution. Simply, the
SEC's function here is purely administrative in nature.
Facts
Sinophil entered into a Share Swap Agreement with Metroplex and Paxell who would
then transfer 40% of their shareholdings in Legend International Resorts Limited
(Legend) for a combined 35.5% stake in Sinophil. A year later, an Unwinding
Agreement was issued where Metroplex and Paxell manifested that they were unable to
return 1.87B of the 3.87B Sinophil shares while the remaining 2B Sinophil shares
remained pledged by Metroplex in favor of the International Exchange Bank and the
Asian Bank.
Thereafter, the Company Registration and Monitoring Department (CRMD) and the
Corporation Finance Department (CFD) of the Securities and Exchange Commission
(SEC) approved the amendments of Sinophil’s Articles of Incorporation which reduced
its authorized capital stock by a total of 2.87B shares. Petitioners filed a Petition for
Review Ad Cautelam Ex Abundanti before the SEC assailing the approval by the
CRMD and the CFD of the amendments by Sinophil of its Articles of Incorporation.
Issue
Whether the decrease of the capital stock of Sinophil was valid.
Held + Ratio
Yes, the decrease of the capital stock was valid since Sinophil submitted the necessary
documents in full compliance with the requirements under Section 38 of the Revised
Corporation Code.
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The Court held that Section 38 of the Revised Corporation Code is clear. A corporation
can only decrease its capital stock if the following are present:
1. Approval by a majority vote of the board of directors;

2. Written notice of the proposed diminution of the capital stock, and of the time
and place of a stockholders' meeting duly called for the purpose, addressed to
each stockholder at his place of residence;
3. 2/3 of the outstanding capital stock voting favorably at the said stockholders'
meeting duly;
4. Certificate in duplicate, signed by majority of the directors and countersigned by
the chairman and secretary of the stockholders' meeting stating that legal
requirements have been complied with;
5. Prior approval of the SEC; and
6. Effects do not prejudice the rights of corporate creditors.
Moreover, Sinophil submitted to the SEC the following documents in support of its
application for the decrease of its authorized capital stock and in full compliance with
the requirements laid down under Section 38 of the Code:
1. Certificate of Decrease of Capital Stock;

2. Director's Certificate;
3. Amended Articles of Incorporation;
4. Audited Financial Statements as of the last fiscal year stamped and received by
the Bureau of Internal Revenue and the SEC (as of December 31, 2004 and 2007);
5. Long Form Audit Report of the Audited Financial Statements (as of December
31, 2004 and 2007);
6. List of Creditors (Schedule of Liabilities as of December 31, 2004 and 2007), as
certified by the Accountant;
7. Written consent of Creditors;
8. Notice of Decrease of Capital; and
9. Affidavits of Publication of the Notice of Decrease of Capital.
Likewise, three stockholders' meeting were held on February 18, 2002, June 3, 2005 and
June 21, 2007 where the stockholders voted for the reduction of the corporation's
authorized capital stock.
Furthermore, in Ong Yang v. Tiu, the Court held that decreasing a corporation's
authorized capital stock, which is an amendment of the corporation's Articles of
Incorporation, is a decision that only the stockholders and the directors can make,
considering that they are the contracting parties thereto. For third persons or parties
outside the corporation like the SEC to interfere to the decrease of the capital stock
without reasonable ground is a violation of the "business judgment rule".
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Sao Paulo Alpargatas S.A. v. Kentex Manufacturing Corporation and Ong King Guan
G.R. 202900 (February 17, 2021)| Hernando, J.
Topic: Intellectual Property Code (R.A. No. 8293); Trademarks; Cancellation of Registration
Doctrine
A case or issue is considered moot when “it ceases to present a justiciable controversy
by virtue of supervening events, so that an adjudication of the case or a declaration on
the issue would be of no practical value or use.”
Facts
Search warrants were filed against respondents for violating R.A. 8293 on trademark
infringement and unfair competition. The respondents filed a Motion to Quash the
Search Warrant, supported by the Certificate of Copyright Registration for Havana
Footwear which was registered on June 1, 1995. In relation, they also submitted a
Trademark Application for Havana Sandals (Stylized) filed on October 9, 2009,
Application for Industrial Design for Slippers on October 9, 2009, and Application for
Industrial Design for Sole on October 19, 2009 with IPOPHL.
SPASA filed a Petition for Cancellation of the respondents’ Certificate of Registration for
the industrial design “Slipper” as well as Certificate of Registration for the industrial
design “Sole” before the IPOPHL – which then canceled the registration for the slipper
and sole considering that SPASA’s registration came before respondents’ registration.
Eventually, they had a settlement agreement that Ong King Guan, Mary Grace Ching,
and Beato Ang would no longer manufacture, import, sell, and offer to sell any
products that infringe upon the “Havaianas” brand of SPASA and that they do not
have any inventories of the same in their possession or safekeeping.
Issue
Whether the settlement rendered the petition moot and academic.
Ruling
Yes, the Settlement Agreement rendered the petition moot and academic.
In Peñafrancia Sugar Mill, Inc. v. Sugar Regulatory Administration, the Court held that a
case or issue is considered moot when “it ceases to present a justiciable controversy by
virtue of supervening events, so that an adjudication of the case or a declaration on
the issue would be of no practical value or use. In such instance, there is no actual
substantial relief which a petitioner would be entitled to, and which would be negated
by the dismissal of the petition. Courts generally decline jurisdiction over such case or
dismiss it on the ground of mootness. This is because the judgment will not serve any
useful purpose or have any practical legal effect because, in the nature of things, it
cannot be enforced.”
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Since the parties entered into the said Settlement Agreement, the effect is to put the
litigation between them to an end, as expressly stated in the said document. In
relation to this, “[t]he parol evidence rule provides that 'when the terms of an
agreement have been reduced into writing, it is considered containing all the terms
agreed upon and there can be, between the parties and their successors in interest, no
evidence of such terms other than the contents of the written agreement.” Thus, the
parties are bound to abide by and respect the provisions of the duly signed
Settlement Agreement regardless of its execution after the instant petition was
already filed.
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Atienza v. Golden Ram Engineering

G.R. No. 205405 (June 28, 2021) | Hernando, J.
Topic: Business Organizations; Corporations; Board or Directors and Trustees; Solidary Liabilities for
damages
Doctrine
Personal liability of a corporate director, trustee or officer along (although not
necessarily) with the corporation may so validly attach, as a rule, only when:
a. He assents (a) to a patently unlawful act of the corporation, or (b) for bad faith or gross
negligence in directing its affairs , or (c) for conflict of interest, resulting in damages to the
corporation, its stockholders or other persons;
b. He consents to the issuance of watered stocks or who, having knowledge thereof, does not
forthwith file with the corporate secretary his written objection thereto;
c. He agrees to hold himself personally and solidarily liable with the corporation; or
d. He is made, by a specific provision of law, to personally answer for his corporate action.
Facts
Eduardo Atienza bought two vessel engines from Golden Ram, and as proof of his
payment, he was issued a Proforma Invoice which stated the warranty period of 12
months. Atienza paid P2.5 million after the two engines were delivered and
commissioned by GRESEC sometime in March 1994. One of the engines suffered a
major dysfunction, the diagnosis of which revealed that the connecting rod had split
resulting in the engine stuck-up. Atienza reported the incident to Golden Ram and the
latter sent Engr. Raymond Torres to inspect and determine the extent of the damage.
Engr. Torres confirmed that the “defect was inherent being attributable to factory
defect.” This finding was reported to MAN B&W Diesel, Singapore Pte. (MAN Diesel)
which is the foreign supplier of the engine. In turn, it promised that the malfunctioning
engine would be replaced in accordance with the warranty.
Atienza repeatedly reached out to Golden Ram and Torres due to the subpar
performance of the engine. Atienza had reported that the right engine was not
functioning properly as it was slow in acceleration and there are a few incidents where
the right engine emitted black smoke. Still, Golden Ram and Engr. Torres had only
provided advice to Atienza and they hadn’t replaced the engine. Finally, when the right
engine broke down, Atienza was verbally assured that the respondents will replace the
engine. They did not say that they will refer the matter to MAN Diesel nor did they
furnish Atienza with a copy of the findings of MAN Singapore.
Due to inaction, Atienza sent a demand letter to Golden Ram, but the latter paid no
heed to the demand. This impelled Atienza to file a complaint for damages arising from
the breach of warranty. The RTC held in favor of Atienza, finding that Golden Ram had
breached the warranty. Golden Ram and Torres, further, were found to have been in bad
faith for their refusal to replace the engine. The CA affirmed the decision, but found that
Golden Ram and Torres did not act in bad faith. Torres was exculpated from solidary
liability with Golden Ram due to the latter’s separate juridical personality.
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Issue
Whether Golden Ram and Torres acted in bad faith so as to hold the latter solidarily
liable with the former for damages.
Held + Ratio
Yes, both the respondents were in bad faith. Bad faith, under the law, does not simply
connote bad judgment or negligence. It imports a dishonest purpose or some moral
obliquity and conscious doing of a wrong, a breach of a known duty through some
motive or interest or ill will that partakes of the nature of fraud.
The bad faith in this case consisted of the refusal to repair and subsequently replace a
defective engine which already underperformed during sea trial and began
malfunctioning six months after its commissioning has been clearly established.
Respondents' uncaring attitude towards fixing the engine which relates to MV Ace I's
seaworthiness amounts to bad faith.
There is solidary liability when the obligation expressly so states, when the law so
provides, or when the nature of the obligation so requires. It cannot be lightly
inferred. Settled is the rule that a director or officer shall only be personally liable for
the obligations of the corporation, if the following conditions concur —
(1) the complainant alleged in the complaint that the director or officer assented
to patently unlawful acts of the corporation, or that the officer was guilty of
gross negligence or bad faith; and
(2) the complainant clearly and convincingly proved such unlawful acts,
negligence or bad faith.
Basic is the principle that a corporation is vested by law with a personality separate and
distinct from that of each person composing or representing it. Equally fundamental is
the general rule that corporate officers cannot be held personally liable for the
consequences of their acts, for as long as these are for and in behalf of the corporation,
within the scope of their authority and in good faith. The separate corporate personality
is a shield against the personal liability of corporate officers, whose acts are properly
attributed to the corporation.
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In Tramat Mercantile v. CA 1, there is personal liability of a corporate director, trustee or

officer along (although not necessarily) with the corporation may so validly attach, as a
rule, only when:
a. He assents (a) to a patently unlawful act of the corporation, or (b) for bad faith or
gross negligence in directing its affairs , or (c) for conflict of interest, resulting in
damages to the corporation, its stockholders or other persons;
b. He consents to the issuance of watered stocks or who, having knowledge thereof,
does not forthwith file with the corporate secretary his written objection thereto;
c. He agrees to hold himself personally and solidarily liable with the corporation; or
d. He is made, by a specific provision of law, to personally answer for his corporate
action.
In this case, Torres is also solidarily liable with Golden Ram as Atienza established
sufficient and specific evidence to show that Torres had acted in bad faith or gross
negligence in the sale of the defective vessel engine and the delivery and installation of
demo units instead of a new engine which Atienza paid for.
1
308 Phil. 13 (1994).
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La Flor Dela Isabela, Inc. (La Flor) v. Commissioner of Internal Revenue (CIR)
G.R. No. 202105 (April 28, 2021)| Hernando, J.
Topic: National Taxation: Tax Remedies Under the National Internal Revenue; Assessment of Internal
Revenue Taxes; Prescriptive Period for Assessment; Suspension of the Running of Statute of Limitations
Relevant Law
Sec. 7 of RA 9262. Jurisdiction. — The CTA shall exercise: a. Exclusive appellate
jurisdiction to review by appeal, as herein provided:
xxx
2. Inaction by the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties in
relation thereto, or other matter arising under the National Internal Revenue Code
or other laws administered by the Bureau of Internal Revenue, where the National
Internal Revenue Code provides a specific period of action, in which case the inaction
shall be deemed a denial;
Doctrine
With respect to the guidelines in the proper execution of the waiver of statute of
limitations under the NIRC, a valid waiver of statute of limitations must be: (a) in
writing; (b) agreed to by both the Commissioner and the taxpayer; (c) before the
expiration of the ordinary prescriptive periods for assessment and collection; and (d)
for a definite period beyond ordinary prescriptive period for assessment and
collection. [Revenue Memorandum Order (RMO) No. 20-90]
Facts
The CIR issued a Letter of Authority (“LOA”) for the examination of La Flor’s Books of
account for all internal revenue taxes for the period of January 1, 1999 to December 31,
1999. La Flor executed five waivers of the statute of limitations to extend the CIR’s
period to assess and collect the deficiency.
The company received a Preliminary Assessment Notice (PAN) and a Formal Letter of
Demand (FLD) to which they filed a protest thereto together with a Supplemental
Protest Letter. Hence, the CIR released its Final Decision on Disputed Assessment
(“FDDA”) with a total assessment of deficiency taxes in the amount P10,460,217.23.
Thereafter, the company received an undated Warrant of Distraint and/or Levy (WDL)
issued by the CIR. Thus, the petitioner filed a Petition for Review with the CTA
assailing the CIR's issuance of WDL.
Issue
1. Whether the CTA validly acquired jurisdiction over the case.
2. Whether the assessment and WDL are null and void.
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Ruling
1. Yes, the CTA validly acquired jurisdiction (See Relevant Law). In Philippine
Journalists v CIR, the Court ruled that the CTA's appellate jurisdiction is not
limited to cases involving decisions of the CIR on matters relating to assessments
or refunds. Section 7 (a) (2) of RA 9282 also covers "other matter arising under
the National Internal Revenue Code or other laws administered by the Bureau of
Internal Revenue." Clearly, the CTA has jurisdiction to determine whether the
WDL issued by the BIR is valid and rule on the validity of the five waivers of the
statute of limitations and La Flor's application for tax amnesty under RA 9480.
2. Yes, the assessment and WDL are null and void since it was found that the
waivers executed failed to strictly comply with the requirements provided
under the law.
The BIR issued Revenue Memorandum Order (RMO) No. 20-90, which provides
that the following requisites must be complied with for there to be a valid waiver
of statute of limitations — (a) in writing; (b) agreed to by both the Commissioner
and the taxpayer; (c) before the expiration of the ordinary prescriptive periods
for assessment and collection; and (d) for a definite period beyond ordinary
prescriptive period for assessment and collection. The period agreed upon can
still be extended by subsequent written agreement, provided that it is executed
prior to the expiration of the first period agreed upon.
The Court had invalidated waivers which did not strictly comply with the
provisions of RMO No. 20-90 and RDAO No. 05-01, such as, but not limited to:
(a) failure to state the specific date within which the BIR may assess and collect revenue
taxes;
(b) failure to sign by the CIR as mandated by law or by his duly authorized representative;
(c) failure to indicate the date of acceptance to determine whether the waiver was validly
accepted before the expiration of the original three-year period;
(d) failure to furnish the taxpayer of a copy of the waiver;42 (e) failure to indicate on the
original copies of the waivers the date of receipt by the taxpayer of their file copy;
(e) execution of the waivers without the written authority of the taxpayer's representative to
sign the waiver on their behalf;
(f) absence of any proof that the taxpayer was furnished a copy of the waiver;
(g) a waiver signed by the Assistant Commissioner-Large Taxpayers Service and not by the
CIR;
(h) failure to specify the kind and amount of tax due; and
(i) a waiver which refers to a request for extension of time within which to present
additional documents and not for reinvestigation and/or reconsideration of the pending
internal revenue case
Applying Section 222 (b) in relation with Section 203 of the NIRC, as well as the
applicable BIR issuances, namely, RMO 20-90 and RDAO 05-01, and the relevant
jurisprudence, the Court found that the waivers subject of this case failed to
strictly comply with the requirements under the law.
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I-Remit, Inc. (for itself and on behalf of JPSA Global Services, Co., JTKC Equities,
Inc. and Surewell Equities, Inc.) vs. Commissioner of Internal Revenue
G.R. No. 209755 (November 9, 2020) | Hernando, J.
Doctrine
Sale of shares in primary offering should be treated separately from the sale in
secondary offering. Necessarily, the corresponding tax for every sale is likewise
computed separately.
Facts
Petitioner offered to the public shares by way of an initial public offering. Of these
shares, certain shares were offered in primary offering by petitioner as the issuing
corporation, and other shares were offered in secondary offering by JTKC, JPSA, and
Surewell, as selling shareholders of petitioner. The dividend used by I-Remit in arriving
at the corresponding tax rate of 4% was 140,604,000, which was the total amount of
shares sold to the public in both primary and secondary offerings. Petitioner argues that
the tax on sale of shares of stock sold or exchanged through initial public offering
should be jointly computed for both sale of shares in primary offering.
Issue
Whether the tax on sale of shares of stock sold or exchanged through initial public
offering under Section 127 (B) is separately computed for shares in primary and
secondary offerings.
Held + Ratio
Yes. A plain reading of Section 127(B) shows that tax is imposed on "every sale, barter,
exchange or other disposition through initial public offering of shares of stock in
closely held corporation. Since tax is imposed on every sale of shares of stock, there is a
need to determine which sales are covered in the sale of shares through initial public
offering. On this score, the second paragraph of Section 127(B) precisely provides that
“[t]he tax herein imposed shall be paid by the issuing corporation in primary offering or by the
seller in secondary offering.”
While the tax on sale of shares in primary offering should be filed and paid by the
issuing corporation within thirty (30) days from the date of listing of the shares of stock
in the local stock exchange, the tax on sale of shares in secondary offering should be
collected and remitted by the stock broker within five (5) banking days from the date of
collection thereof. It cannot be any clearer from the foregoing that the sale of shares in
primary offering is treated separately from the sale in secondary offering. Necessarily,
the corresponding tax for every sale is likewise computed separately.
By expressly differentiating between the sale of shares in primary and secondary

offerings, RR 03-1995 also made it clear that the corresponding tax shall also be
separately computed.
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Hedcor Sibulan, Inc. vs. Commissioner of Internal Revenue

G.R. No. 202093 (September 15, 2021)| Hernando, J.
Topic: National Taxation: Value Added Tax: Tax Refund or Tax Credit
Doctrine
The 120-day period is mandatory and jurisdictional. However, an exception is if the
CIR issued a general interpretative rule in accordance with Section 425 of the Tax
Code which misleads all the taxpayers into prematurely filing judicial claims with the
CTA. BIR Ruling No. DA-489-03, which expressly states that the "taxpayer-claimant
need not wait for the lapse of the 120-day period before it could seek judicial relief
with the CTA by way of petition for review." falls under the second exception.
All taxpayers can rely on BIR Ruling No. DA-489-03 dated December 10, 2003 issued
by the CIR from the time of its issuance up to its reversal in Aichi on October 6, 2010.
Facts
On July 21, 2008, petitioner filed its Original Quarterly VAT Return for the 2nd quarter
of 2008. Two years later, or on June 23, 2010, it filed an Amended Quarterly VAT Return
for the same period. Afterwards, on June 25, 2010, petitioner filed with the BIR a written
application for the refund or issuance of a tax credit certificate (TCC), and an
administrative claim for tax credit/refund as to unutilized input VAT on purchases of
goods and services attributable to zero-rated sales for the 2nd quarter of 2008. On June
29, 2010, pending resolution of its administrative claim, petitioner filed a petition for
review before the CTA Division. Petitioner sought the refund for the unutilized input
VAT. It further averred that it was constrained to file the petition in order to suspend the
running of the two-year prescriptive period for filing of claims for refunds as prescribed
under the NIRC and RR No. 16-2005, as amended.
Issue
Whether petitioner's judicial claim was prematurely filed for not waiting for the lapse of
120 + 30 day prescriptive periods.
Held + Ratio
No. Under Sec 112 (C) of NIRC, the CIR has 120 days from the date of submission of
complete documents to rule on an administrative claim of a taxpayer. In case of denial
of the claim for tax refund or tax credit, either in whole or in part, or if the CIR failed to
act on an application within the prescribed period, the taxpayer shall file a judicial claim
by filing an appeal before the CTA within 30 days from the receipt of the decision
denying the claim or after the expiration the 120-day period. The 120-day period is
mandatory and jurisdictional. It should therefore be strictly observed in order for a
claim for tax credit refund to prosper.
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There are two recognized exceptions to the mandatory and jurisdictional nature of the
period. First, if the CIR, through a specific ruling, misleads a particular taxpayer to
prematurely file a judicial claim with the CTA. Second, if the CIR issued a general
interpretative rule in accordance with Section 425 of the Tax Code which misleads all
the taxpayers into prematurely filing judicial claims with the CTA.
BIR Ruling No. DA-489-03 falls under the second exception. Issued on December 10,
2003, BIR Ruling No. DA-A89-03 expressly provides that a taxpayer-claimant may seek
judicial relief with the CTA by filing a petition for review without waiting for the
120-day period to lapse.
In light of the foregoing, we rule that the petition for review for judicial claim filed by
petitioner before the CTA was not prematurely filed.
The administrative claim was filed on June 25, 2010. Four days later, or on June 29, 2010,
petitioner filed its judicial claim. It is evident that the judicial claim was filed well
within the issuance of BIR Ruling No. DA-489-03 before it was invalidated by Aichi.
Thus, petitioner's immediate filing of its petition for review before the CTA without
waiting for the prescribed period of 120 days to lapse is thus permissible. Thus, the CTA
En Banc erred in affirming the dismissal of petitioner's judicial claim on the ground of
prematurity. The instant case should therefore be remanded to the CTA Division for the
determination of the refundable or creditable amount due to petitioner, if any.
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Harte-Hanks Philippines, Inc. vs. Commissioner of Internal Revenue

G.R. No. 205189 (March 7, 2022) | Hernando, J.
Doctrine
with the CTA by way of petition for review." falls under the second exception.
All taxpayers can rely on BIR Ruling No. DA-489-03 dated December 10, 2003
issued by the CIR from the time of its issuance up to its reversal in Aichi on
October 6, 2010.
Facts
On April 25, 2008, petitioner filed its original Quarterly VAT Return with the BIR. The
return was amended on May 29, 2008 showing that HHPI had no output VAT liability
as it had no local sales subject to 12% VAT but it has unutilized input VAT on its
domestic purchases of goods and services on its zero-rated sales of services. On March
23, 2010, petitioner filed a claim for refund of its unutilized input VAT before the BIR.
Asserting that there was inaction on the part of the Commissioner of Internal Revenue
(CIR) and in order to toll the running of the two-year period prescribed by law, HHPI
elevated its claim to the CTA on March 30, 2010.
Issue
Whether petitioner's judicial claim was prematurely filed for not waiting for the lapse of
120+30 day prescriptive periods.
Held + Ratio
No. The general rule under Section 112 (C) 19 of the Tax Code, as explained in Aichi, is
clear, plain and unequivocal. The observance of the 120 and 30-day periods is crucial in
filing a judicial appeal before the CTA.
There is an exception to this general rule, however. BIR Ruling No. DA-489-03, a general
interpretative rule issued by the CIR pursuant to its power under Section 4 of the Tax
Code, expressly states that the "taxpayer-claimant need not wait for the lapse of the
120-day period before it could seek judicial relief with the CTA by way of petition for
review."
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Similar to the previous Court rulings, even if petitioner seemed to have prematurely
filed its judicial claim under the general rule, the Court, pursuant to BIR Ruling No.
DA-489-03, considers petitioner to have filed its judicial claim on time.
The CTA, therefore, has jurisdiction over the judicial claim filed by petitioner. Taking
judicial notice of the BIR Ruling and the consistent application of the same to past Court
rulings, the Court holds that both the CTA Second Division and En Banc erred in
denying petitioner's petition for review.
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Energy Development Corporation v. Commissioner of Internal Revenue

GR No. 203367 (March 17 2021) | Hernando, J.
Doctrine
with the CTA by way of petition for review.", falls under the second exception.
All taxpayers can rely on BIR Ruling No. DA-489-03 dated December 10, 2003 issued
by the CIR from the time of its issuance up to its reversal in Aichi on October 6, 2010.
Facts
On various dates, EDC filed its quarterly VAT Returns and the amendments thereof, for
the year 2007. On March 30, 2009, EDC filed an administrative claim for tax credit or
refund of its unutilized input VAT for its zero-rated sales for the same taxable year On
April 24, 2009, EDC filed an appeal/Petition for Review with the CTA.
Issue
WON petitioner's judicial claim was prematurely filed for not waiting for the lapse of
120+30 day prescriptive periods.
Held + Ratio
As held in Aichi, there is nothing in Section 112 of the NIRC which sanctions the
simultaneous filing of administrative and judicial claims, and the filing of the judicial
claim prior to the action of the CIR or the lapse of the 120-day period within which the
CIR is required to act on the administrative claim.
San Roque clarified the jurisdictional doctrines in Aichi. The exception to the strict
application of Aichi and the general interpretative rules issued by the CIR which
ultimately save EDC's herein petition. Given the difficult question of law and conflicting
rulings by the Court, EDC and taxpayers alike have hedged their actions in the filing of
simultaneous administrative and judicial claims or the filing of premature judicial
claims on an incorrect interpretation of Section 112 (A) and (C) of the NIRC.
The Court ruled in San Roque that all taxpayers can rely on BIR Ruling No. DA-489-03
dated December 10, 2003 issued by the CIR from the time of its issuance up to its
reversal in Aichi on October 6, 2010.
Clearly, from the foregoing, EDC did not comply with Section 112 (C) of the NIRC
relative to the filing of its judicial claim before the CTA. Thus, even without harping on
the applicability of Aichi, EDC's premature judicial claim has no leg to stand on.
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However, applying the exception molded in San Roque, EDC's petition for review before
the CTA should be reinstated since the filing of its administrative and judicial claims fell
within the stated period.
On this score, we remove the cobwebs in the declaration of the CTA En Banc that EDC's
premature filing of its petition for review merely failed to exhaust administrative
remedies which "is not a jurisdictional defect." As has been repeatedly emphasized
herein and in the auspicious case of San Roque, the 120+30 day prescriptive periods in
the law is mandatory and jurisdictional.
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CIR v. Unioil Corporation

G.R. No. 204405 (August 04, 2021)| Hernando, J.
Topic: Procedural Due Process in Tax Assessments / Prescriptive Period for Assessment
Doctrine
Tax collection must be preceded by a valid assessment to allowthe taxpayer to protest
the assessment, present their case, and adduce supporting evidence. Without
complying with the unequivocal mandate of first informing the taxpayer of the
government’s claim,there can be no deprivation of property, because no effective
protest can be made.
Facts
Unioil received a Formal Letter of Demand and Final Assessment Notice (FLD/FAN)
finding it liable for deficiency withholding tax on compensation and deficiency
expanded withholding tax for the year ending December 31, 2005. It filed its protest to
the FLD/FAN on February 25, 2009 and submitted its supporting documents on April
24, 2009. Thereafter, it filed the instant Petition for Review before the CTA on November
20, 2009, considering that the CIR failed to act on its protest and the 180-day period had
already expired.
The CTA Third Division ruled in favor of Unioil for the CIR’s failure to observe the
notice requirement under Sec. 228 of the NIRC, specifically the issuance of a Preliminary
Assessment Notice (PAN), amounting to a denial of Unioil’s right to due process. Such
decision was affirmed by the CTA En Banc. hence, the present appeal where the CIR
tries to present for the first time proof of its issuance of a PAN and Unioil's actual
receipt thereof.
Issues
1. Whether Unioil was denied its right to due process because it allegedly did not
receive a PAN.
2. Whether CIR's assessment of Unioil for deficiency withholding taxes has
prescribed.
Held + Ratio
1. Yes, Unioil was denied its right to due process. The CIR's failure to comply
with the notice requirements under Section 228 of the 1997 NIRC
effectively denied Unioil of its right to due process. Consequently, the
CIR's assessment was void. Tax collection must be preceded by a valid
assessment to allow the taxpayer to protest the assessment, present their
case and adduce supporting evidence.
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Without complying with the unequivocal mandate of first informing the

taxpayer of the government's claim, there can be no deprivation of
property, because no effective protest can be made.
The CIR's negligence in their power and duty to properly assess taxes is
palpable in this case. First, the CIR failed to establish the fact of their issuance
of a PAN by not keeping proper records of the tax audit and assessment of
Unioil. During the trial, the CIR even relied on Unioil's proffered evidence as
proof of issuance. Second, the issue on the ostensibly "missing" PAN arose
because of the CIR's contention that the timely issuance thereof sufficiently
interrupted the three-year prescriptive period for the assessment of taxes under
Section 203 of the NIRC. Third, the FAN accompanying the Formal Letter of
Demand did not comply with the obligatory provision on protesting a tax
assessment under Section 228 of the NIRC. Ultimately, void assessment bears
no valid fruit.
In affirming the CTA's holding that the assessment against Unioil is void, the
Court emphasized the import of an assessment as containing not only a
computation of tax liabilities but also a demand for payment within a prescribed
period. The issuance of an assessment is vital in determining the period of
limitation regarding its proper issuance and the period within which to protest it.
2. Yes, the CIR’s right to assess Unioil had prescribed. Section 203 of the NIRC
mandates the government to assess internal revenue taxes within three years
from the last day prescribed by law for the filing of the tax return or the actual
date of filing of such return, whichever comes later. Hence, an assessment
notice issued after the three-year prescriptive period is no longer valid and
effective.
While the CIR tried to invoke the exceptions under Sec. 222 of the NIRC,
specifically averring that Unioil filed fraudulent claims, the CIR did not
substantiate its allegation of fraud and appears to make the argument only to
evade the three-year prescriptive period to assess the tax.
It bears repeating that Section 203 of the NIRC is the mandatory period of
limitation for the government to assess taxes, subject only to the prefaced
exception explicitly provided thereunder: "[e]xcept as provided in Section 222,
internal revenue taxes shall be assessed within three (3) years after the last day
prescribed by law for the filing of the return x x x." If the CIR indeed
substantiated their vaguely drawn imputation that Unioil had filed a fraudulent
return, there was no reason for the speed with which they issued the Formal
Letter of Demand. Plainly, the Formal Letter of Demand was hastily issued and
did not take into consideration the arguments of Unioil in its Protest to the PAN.
The Formal Letter of Demand and the FAN were ostensible automated
assessments merely echoing the PAN.
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CIR v. San Miguel Corporation

GR No. 180740 (November 11, 2019) | Hernando, J.
Topic: Jurisdiction, Power, and Functions of the Commissioner of Internal Revenue; Interpreting Tax
Laws and Deciding Tax Cases
Doctrine
Based on [Secs. 204 and 229 of the NIRC], it is clear that within two (2) years from the
date of payment of tax, the claimant must first file an administrative claim with the
CIR before filing its judicial claim with the courts of law. Both claims must be filed
within a two (2)-year reglementary period.
Timeliness of the filing of the claim is mandatory and jurisdictional, and thus the
Court cannot take cognizance of a judicial claim for refund filed either prematurely
or out of time.
Facts
RA 8240 took effect on January 1, 1997. This subjected certain fermented liquors to an
excise tax of P6.15 per liter IF the net retail price per liter volume capacity is less than
P14.50. RA 8240 further provided that “The excise tax from any brand of fermented
liquor within the next three (3) years from the effectivity of Republic Act No. 8240 shall
not be lower than the tax which was due from each brand on October 1, 1996.” Prior to
8240, San Miguel Corporation (SMC) has been paying an ad valorem tax for its Red
Horse branch amounting to P7.07 per liter.
Come December 16, 1999, the Secretary of Finance issued Revenue Regulations (RR)
17-99 which implements a 12% increase on the excise tax on fermented liquors (and
other affected goods) effective come January 1, 2000. Section 1 of the RR then further
provided that “that the new specific tax rate for any existing … fermented liquors shall not be
lower than the excise tax that is actually being paid prior to January 1, 2000”. The effect of the
RR is that the P7.07 payment of SMC supposedly lessened by RA 8240 to P6.15 (though
increased at P6.89 by the RR) was further extended instead of it already decreasing
some after the third year of 8240.
Issue
1. Whether Section 1 of the Revenue Regulation released by the BIR is valid.
2. Whether the claim for refund/credit of excess excise tax payments of SMC
should be allowed.
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Held + Ratio
1. No, Section 1 of the RR released by the BIR constituted an unauthorized
administrative legislation as it is a tax imposition not sanctioned by statute,
nor is it supported by Sec. 145 of the Tax Code. By adding the qualification that
the tax due after the 12% increase becomes effective shall not be lower than the
tax actually paid prior to 1 January 2000, Revenue Regulations No. 17-99
effectively imposes a tax which is the higher amount between the ad valorem tax
being paid at the end of the three (3)-year transition period and the specific tax
under paragraph C, sub-paragraph[s] (1)-(4), as increased by 12% — a situation
not supported by the plain wording Section 145 of the Tax Code.
2. No, said claim should be disallowed. Under Sec. 204 of the NIRC, “[...] no credit
or refund of taxes or penalties shall be allowed unless the taxpayer files in
writing with the Commissioner a claim for credit or refund within two (2) years
after the payment of the tax or penalty.” Likewise in Sec. 229, it is provided that
“[...] no such suit or proceeding shall be filed after the expiration of two (2) years
from the date of payment of the tax or penalty regardless of any supervening
cause that may arise after payment.”
Based on the two provisions, it is clear that within two (2) years from the date of
payment of tax, the claimant must first file an administrative claim with the CIR
before filing its judicial claim with the courts of law. Both claims must be filed
within a two (2)-year reglementary period. Timeliness of the filing of the claim
is mandatory and jurisdictional, and thus the Court cannot take cognizance of
a judicial claim for refund filed either prematurely or out of time.
In this case, SMC filed its administrative claim on January 10, 2003 through a
letter to the BIR, and its judicial claim through a Petition for Review filed with
the CTA First Division on February 24, 2003. Counting back from February 24,
2003, the CTA First Division determined that the reckoning date for the two
(2)-year prescriptive period for this particular judicial claim of SMC was
February 24, 2001 and accordingly declared that the claim of SMC for excess
excise tax paid prior to said date had already prescribed. This conclusion of the
CTA First Division, as affirmed by the CTA En Banc, is in full accord with the
provisions of the Tax Reform Act of 1997. The Court will not disturb the same.
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UP Law Center
CIR v. Philex Mining Corporation

G.R. No. 218057 (January 18, 2021) | Hernando, J.
Topic: Taxpayer’s Remedies
Doctrine
For [the] purpose of determining when the supporting documents have been
completed — it is the taxpayer who ultimately determines when complete documents
have been submitted for the purpose of commencing and continuing the running of
the 120-day period.
Facts
Philex Mining filed its original Quarterly VAT Return on January 21, 2010. Philex would
later file an amended Quarterly VAT Return on September 13, 2011 for its total
zero-rated sales of ~P2.7B, importation of goods of ~P93M with input tax of ~P11M, and
purchases of services of ~P133M with input tax of ~P16M.
Based on the said amendment, Philex filed a claim for refund/tax credit in the amount
of ~P27M. When the CIR failed to act on the claim, Philex brought an action to the CTA.
The CTA 2nd Division ordered the CIR to to refund in favor of Philex the amount of
~P18.6M representing its unutilized and excess input VAT attributable to its zero-rated
sales for the Q4 of 2009. Such decision was affirmed by the CTA En Banc, hence the
present petition.
Issue
1. Whether Philex’ appeal to the CTA was timely filed
2. Whether Philex is entitled to the refund representing its unutilized and excess
input VAT attributable to its zero-rated sales for the fourth quarter of 2009
Held + Ratio
1. Yes, the appeal was timely filed. Sec 112 (C) of the NIRC provides that the
running of the 120-day period for the CIR to decide the claim for refund
commences from the time of the submission of complete documents in support
of the tax refund application.
As clarified in Pilipinas Total Gas vs CIR, “[f]or purposes [sic] of determining

when the supporting documents have been completed — it is the taxpayer who
ultimately determines when complete documents have been submitted for the
purpose of commencing and continuing the running of the 120-day period.”
Pursuant to the pronouncement, it is Philex which determines the completeness
of the documents submitted for purposes of counting the 120-day period.
Considering that no notice or requests for additional documents was given by

the CIR or no other action was taken within the 120 days from 28 Sep 2011, Philex
had 30 days from January 26, 2012, the expiration of the 120-day period, or until
February 26, 2012, to appeal to the CTA.
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UP Law Center
Philex properly and timely filed its judicial claim on February 3, 2012. There is
thus no merit in the CIR's contention that Philex's judicial claim was premature
or that its supporting documents were incomplete.
2. Yes, Philex is entitled to the refund. The CTA En Banc found that Philex's
zero-rated sales, which were supported by financial invoices dated outside the
period of claim, were actually generated during the period of claim in view of the
provisional invoices and bills of lading during the latter period.
Here, the CTA 2nd Division commissioned an Independent Certified Public

Accountant (ICPA) who found that Philex’s claim for refund was well-founded.
The CTA En Banc likewise saw no reason to deviate from the findings of the
ICPA and the CTA 2nd Division in partially granting Philex's refund “as the same
is supported by pieces of evidence, which prove [Philex's] compliance with the
requirements for refund of its claimed input tax attributable to zero-rated sales
for the fourth quarter of taxable year 2009.”
The Court further agrees with CTA that the submission of the subsidiary sales
journal and subsidiary purchase journal is not indispensable to support Philex's
claim for refund. Section 112 (A) of the NIRC, which enumerates the requisites
for a taxpayer to be entitled to a tax refund or credit, does not require subsidiary
journals as part of the substantiation requirements. The subsidiary journals are
not required, but they may be utilized by the CIR as vital sources of information
for other purposes such as making assessments.
Page 34
UP Law Center
Commissioner of Customs v. PTT Philippines Trading Corp.

G.R. Nos. 203138-40 (February 15, 2021) | Hernando J.
Topic: Taxpayer Remedies; Protesting an Assessment
Doctrine
Rules of procedure should not be rigidly applied if it will tend to obstruct rather than
serve the broader interests of justice. Depending on the prevailing circumstances of
the case, such as where strong considerations of substantive justice are manifest in the
petition, the Court may relax the strict application of the rules of procedure in the
exercise of its equity jurisdiction.
Facts
A Bureau of Customs Audit Team declared PTT Philippines Trading Corp. (PTTPTC) to
have mislabeled some of its imported fuel to make it eligible for special tax benefits. As
such, it was assessed to be liable for customs duties, value-added tax, and penalties
totaling ~P4B. On October 1, 2007, PTTPTC made a partial payment of ~P117M.
A demand letter was sent to PTTPTC on November 7 of the same year, asking it to settle
the discrepancy assessment until November 15. Instead of paying, PTTPTC filed a case
before the CTA to assail the validity of the ~P4B assessment on November 20 (CTA Case
No. 7707). Despite the said action, however, PTTPTC still made two separate payments
of ~P176M under protest on November 29 and December 18.
Two years later, PTTPTC filed two cases seeking to refund the two payments it made on
November 29 and December 18, 2007. In response, the Commissioner of Customs
argued that the two cases were filed beyond the 30-day period to protest the Nov. 7,
2007 demand letter. The CoC further averred that even if the cases are to be treated as
claims for refund instead of a protest of assessment, the CTA nonetheless has no
jurisdiction over actions questioning the ruling of the CoC under RA 9262.
Issue
Whether PTTPTC failed to file its protest to the November 7, 2007 demand letter within
the 30-day period, and whether the CTA erred in consolidating CTA Case Nos. 8002
and 8023.
Held + Ratio
No, the PTTPTC timely filed its protest against the assessment and the Nov. 7, 2007
demand letter when it filed the case on November 20, 2007 to protest the ~P4B
assessment. Pending resolution of its petition, PTTPTC paid its outstanding assessment
obligation on November 29, 2007 and December 18, 2007. Having paid its outstanding
assessment under protest, PTTPTC then filed the two subsequent cases to recover the
partial payments it made.
Page 35
UP Law Center
Rules of procedure should not be rigidly applied if it will tend to obstruct rather than
serve the broader interests of justice. Depending on the prevailing circumstances of
the case, such as where strong considerations of substantive justice are manifest in
the petition, the Court may relax the strict application of the rules of procedure in the
exercise of its equity jurisdiction.
CTA Case No. 7707 is a protest to an alleged erroneous customs duties assessment. In
this case, PTTPTC prayed for the nullification of the assessment as well as the
November 7, 2007 demand letter ordering PTTPTC to settle the obligation. On the other
hand, CTA Case Nos. 8002 and 8023 are claims for refund of the amount that
respondent paid under protest to the BoC representing its assessment balance pursuant
to the November 7, 2007 demand letter it was contesting in CTA Case No. 7707. Taking
into consideration the prayer of PTTPTC in CTA Case No. 8002, on one hand, and CTA
Case No. 8023, on the other hand, the logical conclusion is to regard both petitions as
supplements to CTA Case No. 7707 despite being filed and docketed as separate
petitions.
Page 36
UP Law Center
BIR v. Cagang
G.R. No. 230104 (March 16, 2022) |Hernando, J.
Topic: Compromise and Tax Amnesty
Doctrine
A tax amnesty, much like a tax exemption, is never favored or presumed in law. The
grant of a tax amnesty, similar to a tax exemption, must be construed strictly against
the taxpayer and liberally in favor of the taxing authority.
Facts
CEDCO, Inc. was assessed the following taxes for taxable years 2000 and 2001: (1)
income tax, (2) VAT, (3) expanded withholding tax; and (4) withholding tax on
compensation. BIR issued a FDDA therefor on September 28, 2007. However, on
November 28, 2007, CEDCO availed of the tax amnesty under RA 9480, which covers
“all national internal revenue taxes for the taxable year 2005 and prior years” and
promptly paid the amnesty tax the following day.
BIR nonetheless directed CEDCO to pay its tax liabilities on June 24, 2008. When
CEDCO failed to settle its tax obligations, a complaint-affidavit for violation of Sec. 255
NIRC was filed against Cagang and Paredes, in their capacities as CEDCO’s treasurer
and president, respectively, for their alleged willful failure to pay CEDCO’s deficiency
taxes for taxable years 2000 and 2001.
The complaint was dismissed by the DOJ-NPS for lack of probable cause. Said decision,
however, was reversed by the Secretary of Justice. Cagang filed a petition for certiorari
before the CA, arguing that the DOJ acted with grave abuse of discretion when it
ignored the fact that (1) CEDCO had availed of the tax amnesty under RA 9480 and is
therefore not required to pay tax, (2) CEDCO is qualified to immunity from criminal
penalties under the NIRC since BIR’s complaint dated August 14, 2009 was not yet
existing when RA 9480 took effect, and (3) He was not a corporate officer or employee
responsible for the payment of CEDCO’s tax obligations. CA granted Cagang’s petition
for certiorari, finding that CEDCO was qualified to avail of the tax amnesty under RA
9480. BIR filed the present petition for review on certiorari.
Issue
Whether CEDCO is entitled to avail of the tax amnesty under RA 9480
Held + Ratio
Yes, CEDCO is entitled to avail of the tax amnesty as to its income and VAT liabilities,
but not as to its withholding tax liabilities. Sec. 8 of RA 9480 excludes withholding
taxes from the coverage of the amnesty program.
In 2007, Congress enacted RA 9480, which granted a tax amnesty covering "all national
internal revenue taxes for the taxable year 2005 and prior years, with or without
assessments duly issued therefor, that have remained unpaid as of December 31, 2005."
Page 37
UP Law Center
However, RA 9480 is not without exceptions. Section 8 of the said law enumerates those
persons and cases that are not covered by the law, viz.:
Section 8. Exceptions. — The tax amnesty provided in Section 5 hereof shall not extend to
the following persons or cases existing as of the effectivity of RA 9480:
(a) Withholding agents with respect to their withholding tax liabilities;
xxx
(e) Those with pending criminal cases for tax evasion and other criminal offenses under
Chapter II of Title X of the National Internal Revenue Code of 1997, as amended, and the
felonies of frauds, illegal exactions and transactions, and malversation of public funds
and property under Chapters III and IV of Title VII of the Revised Penal Code;
Meanwhile, the Department of Finance's Department Order No. 29-07, which provides
for the Implementing Rules and Regulations of RA 9480, states that:
Section 5. Exceptions. — The tax amnesty shall not extend to the following persons or
cases existing as of the effectivity of this Act:
(a) Withholding agents with respect to their withholding tax liabilities;
xxx
(e) Those with pending criminal cases filed in court or in the Department of Justice for tax
evasion and other criminal offenses under Chapter II of Title X of the National Internal
Revenue Code of 1997, as amended
From the foregoing, it is crystal clear that withholding taxes are not covered by the
amnesty program. Thus, there is merit in the BIR's submission that CEDCO is not
qualified to avail of the tax amnesty with respect to its withholding tax liabilities.
A tax amnesty, much like a tax exemption, is never favored or presumed in law. The
grant of a tax amnesty, similar to a tax exemption, must be construed strictly against
the taxpayer and liberally in favor of the taxing authority. Here, the Court finds that
the tax amnesty under RA 9480 does not extend to CEDCO with respect to its existing
withholding tax liabilities, as explicitly provided in the said law. However, with respect
to the deficiency taxes pertaining to CEDCO's income tax and VAT for taxable years for
2000 and 2001, the Court finds that CEDCO is entitled or qualified to avail of the tax
amnesty considering that it had submitted the necessary documents and complied with
the requirements under RA 9480.
Page 38

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